Revealed: How a taxpayer bail out that could run into BILLIONS was built in to Obamacare to protect insurance companies if they lost out in reform

The Affordable Care Act included a way for insurance companies to recoup their losses from covering everyone regardless of their health

If insurers lose money, the government’s funds – taxpayer dollars – cover between 50 and 80 percent of the losses for three years

Premiums for 2015 are expected to skyrocket before the November elections, and Democrats hope the payments will keep prices down

When the Obamacare law passed in 2010, it omitted the authority for the government to make these ‘risk corridors’ payments

But in a bit fo regulatory sleight-of-hand last week, the Health and Human Services Department quietly issued a regulation authorizing them

By David Martosko, U.S. Political Editor

Published: 12:17 EST, 21 May 2014 | Updated: 12:53 EST, 21 May 2014

Health insurance companies are poised to have access to billions of taxpayer dollars in what Republicans are calling an Obamacare ‘bailout.’

In a little-noticed regulation issued late last week, the Department of Health and Human Services authorized massive payments to insurers that lose money because of the Affordable Care Act’s requirement that they cover even the oldest and sickest Americans.

A provision of the Obamacare law known as ‘risk corridors’ provides the safety valve for insurance companies if they keep rate hikes modest but still wind up in the red.

According to that system, insurers whose claims in 2014 are 3 per cent higher than what was projected will recover half of the different from the government.

If claims are 8 per cent or more above projections, taxpayers cover 80 per cent of the company’s losses.

An aide to a member of the House Republican leadership told MailOnline that the risk corridor system was calculated to cushion the blow of rate hikes until President Barack Obama is out of office.

‘They set the risk corridors to expire in three years,’ the staffer said. ‘Guess who will be long gone from the White House by then?’

‘This is just another taxpayer-funded subsidy for big businesses. If the Obamacare system were fair, it would force insurers to price their policies according to reality. Of course, if that happened, rates would double and you’d see well-deserved panic in the streets.’

Marco Rubio, a Florida Republican senator, introduced legislation in November that would end the risk corridor program completely.

‘The American people are sick of Washington picking winners and losers, especially since the chosen losers often end up being taxpayers who foot the bills for Washington’s mistakes,’ Rubio said then.

Democrats have long feared that if rates jump too much and too quickly, consumers could abandon their insurance entirely and opt to pay modest fines instead. That could collapse the entire system.

The Los Angeles Times first reported on the new HHS regulations, and noted that the 2015 rates will be published just weeks before November’s congressional midterm elections.

An HHS spokesman told The Wall Street Journal in January that the point of the risk corridors was to help smooth out some of the uncertainties associated with an entirely new pricing structure, and that the program was expected to be ‘budget neutral.’

That’s because insurers that make more profit this year than they estimated will be forced to surrender a portion of their excess to the federal government – providing finds to reimburse their less fortunate competitors.

The Congressional Budget Office estimated in February that the government would actually reap a windfall, since insurers were more likely to aim high when pricing their policies under the new Obamacare requirements.

The CBO estimated that while the government would pay out $8 billion to underperforming insurers between 2015 and 2017, it would collect $16 billion from more successful companies.

But if CBO is wrong and a the gap remains, HHS intends to spend whatever it takes.

‘We are confident this three-year program will not create a shortfall,’ Health and Human Services spokeswoman Erin Shields Britt said Wednesday in a statement. ‘However, we want to be clear that in the highly unlikely event of a shortfall, HHS will use appropriations as available to fill it.’

Those funds could come from anywhere in the HHS budget, pilfering money from research programs, social services or public health programs.

When the law was passed in 2010, its framers omitted the authority for HHS to spend money on risk corridor payments.

Last week’s regulation erases that mistake, authorizing HHS to write checks to insurers.